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The Death of Manufacturing and The Rise of Services

The PBS Nightly Business Report from Diane Eastabrook on September 30th offered some startling statistics and insights.

The U.S. lost roughly 3 million, or one out of every six, factory jobs in the past decade.

About half of them disappeared over the last three years. Because we rent the American Society for Quality (ASQ) mailing list, I know that membership has declined from 98,000 in 1999 to only 40,000 today.

The Federal Reserve Bank of Chicago began a project to find out if manufacturing is dying in the U.S. The Chicago Fed Bank wants to know if factories shed jobs in recent years because of the recession, or because of a structural change in the economy. It says one problem can be corrected with interest rate cuts, but the other problem can't.

The statistics aren't promising. At the end of World War II, one in every three Americans worked in a factory; today, one in eight does.

Economists fear that the apparel and textile industries face the greatest risk. But industries that require more skill, that involve R&D, capital, and high-skill are most likely to survive and prosper: Instruments and controls, parts and transportation, chemicals.

While job growth has been flat in manufacturing over the past 50 years, it has been rising steadily in the service industry.

Economists say that this could mean the U.S. is evolving into a service-based society, instead of a manufacturing based one.

This means that we need to shift our attention from manufacturing quality to service quality. More and more, America is becoming the "brain" of the planet and other countries are the hands. I recently spoke to an executive who was retiring after 32 years from a manufacturing company. They had just completed offshoring their manufacturing business. Only a few dozen managers remained to oversee the business. And I've talked to small manufacturing shops that are doing well, meeting the needs of companies like Toyota and Honda who continue to manufacture in the U.S.

99% of manufacturing companies are small businesses. They will continue to need quality improvement and control to succeed in a global marketplace.

But hardly a week goes by that some service company manager calls and wonders if Six Sigma applies to service businesses. The answer is "of course!" Every business, regardless of size suffers from two profit-eating problems that can be solved with Six Sigma methods and tools: defects and delay.

While manufacturing businesses had to embrace quality to survive, service businesses have yet to realize that they will need to embrace quality.The same is true of information technology professionals (which is where I see our economy headed over the long term).

We're facing the end of manufacturing and the explosion of services and IT as the core of our economy. We can fight the change or lead it. It's up to us.